Executive Insights: Cindy Estis Green CEO and Co-Founder of Kalibri Labs

Source: HP Hotels Fall Newsletter

In this interview, Cindy Estis Green, CEO & Co-founder of Kalibri Labs, discusses hospitality data collection and benchmarking and the emergence of a new discipline of revenue strategy

Cindy’s hospitality career includes serving with Hilton International and founding the data mining consultancy, Driving Revenue, which was later sold to Pegasus Solutions. She was also inducted into the prestigious HFTP Hospitality Technology Hall of Fame and named as one of Cornell University’s 90 Influential Hotelies.
Cindy says the Kalibri name is meant to evoke the hummingbird (colibrí in Spanish), which can fly backwards and forwards, representing a view of data both historical and predictive models for the future; the company name sounds like the word calibrate and contains the word libra, for balance and truth.

What distinguishes Kalibri Labs’ approach to the hospitality sector?

We formed Kalibri Labs about six years ago as a next generation benchmarking and Big Data platform that collects data from all hotels in the U.S. and we are expanding globally. We have cost information for about seven billion transactions in our database right now and we add about another 100 million transactions each month.
We want benchmarking and performance evaluation to reflect the quickly evolving digital market place and its impact on the economics of hotels. For example, instead of taking a legacy approach to RevPAR, we look at net RevPAR, a key component of which is the cost of customer acquisition.
This is a different focus from when I first entered the industry, where everything was focused on top line revenue. But, today, with online travel agents, search engines, the prominence of big tech companies and entities like Airbnb, it becomes important to manage both revenue as well as the cost of acquiring that revenue. Our tools help hotel operators do that.

What hospitality entities do you work with?
We work with those interested in looking at hotel performance, especially owners, operators and brands that want to move into the next generation of performance evaluation, as well as destination marketing organizations and the entire real estate ecosystem such as brokers, bankers, advisory services and developers. 
In particular, we have done a lot of work with real estate developers to inform their decisions around brand choice, transaction pricing and overall buy and sell decisions.

What is the next or further goal of your approach?
We continue to develop algorithms aimed at understanding the optimal business mix for any property. In doing so, in addition to tracking the cost of acquisition, as just discussed, the Kalibri Labs Optimal Business Mix algorithm looks at a wide range of factors to include meeting space availability, a hotel’s base of loyalty contribution and consumer reviews.
We also analyze comp sets by customer segments and by weekpart. In the traditional world, you might look at RevPAR and how you compare to nearby competitors. But traditional benchmarking may be misleading if you are narrowing your scope to a small number of hotels with which you have, say, a 50 percent to 70 percent overlap in business production. However, there may be many more additional hotels with which you overlap in just one or two segments, but those may be valuable segments for you.
We are trying to derive a more realistic benchmark for a hotel than just an arithmetic average of the performance of a handful of nearby hotels. The goal is to understand the full range of opportunities in any market and enable a hotel to benchmark itself against the best it can achieve knowing realistic market opportunity and competitive performance, given the constraints of customer feedback, brand contribution (using loyalty as a proxy) and physical plant (guest and meeting rooms).
How might this apply to real estate development?

Our approach also has significant implications for determining transaction values and the viability of new developments.

Let’s consider the example of an extended stay property. We would look at the volume of long term stay in a market in a variety of ways, including by length of stay and how many hotels are serving each segment of extended stay demand. Are traditional hotels absorbing that demand; or is there room for dedicated, purpose-built product to accommodate that market? We can answer questions like that in ways that weren’t possible before.

What is one big takeaway from what you have learned about net revenue?
Hotels are spending about 15 to 25 percent to acquire customers; second only to labor cost. Owners and operators all manage labor even though it is considered “a cost of doing business”; so why wouldn’t you want to take a similar approach with cost of acquisition? Hotel operators can be too accepting of commission cost as something that cannot be managed, but that is the big lesson from the data. It’s not a matter of negotiating better OTA or third party vendor deals, which is usually not in the control of a hotel, but rather managing the hotel’s channel mix, which largely is.
Cost of customer acquisition will be a huge variable in the next decade. As a strategy in controlling these costs, loyalty programs will be the retaining wall for the hotel brands that will really differentiate them and give them strength going forward in supporting hotels’ efforts to control cost of acquisition by reinforcing the direct channels. And at the hotel level, the operators need to gain expertise in managing each segment and each channel so they learn to leverage opportunities as profit contribution managers.

What’s next for Kalibri Labs?
We will continue to expand the use of our optimal business mix algorithms, which, among other things, will help entities forecast budgets more accurately.
Planning tools become critical for budgeting and forecasting and in a real estate scenario where you are considering an acquisition.  You can run different numbers and scenarios into our model to improve the underwriting accuracy.
We want to open the aperture on the lens so that those involved in the real estate community are more fully aware of the range of opportunities available to them; or they can set their targets in a broader way and gain accuracy due to an understanding of the composition of RevPAR in a market, not just guessing on the underlying strength of a market with broad brush top line numbers.

How would you sum up progress in this area?
We have built a revenue strategy platform, which supplements the  efforts around traditional revenue management. Going forward, this discipline of revenue strategy, which is much more holistic, has to enable hotel operators to take actions that go beyond pricing and inventory management.  These include group, corporate and travel agent sales, digital marketing, and other promotional activities such as loyalty, email or lead generation programs. In a nutshell, you could be optimal in pricing, but sub-optimal in performance because the team has not looked across all opportunities and set targets that point toward shared profit contribution goals using all revenue levers.
The approach of revenue strategy allows owners to make sure that the operating team is aligned with its asset valuation target by building operating targets that have a direct connection to flow-through on every revenue opportunity they pursue.

How Alibaba-Backed Shiji Is Expanding Its Tech Sales to Hotels Outside of China

Shiji, the hospitality tech giant of China, has been expanding its global push since February — when it announced a $486 million investment from e-commerce powerhouse Alibaba Group.

Shiji, which has 20 foreign subsidiaries, has in the past month acquired StayNTouch, a hotel tech services provider, and Concept Software Systems, a retail tech provider for golf, spa, and other activities. A few months ago, it bought out the remaining shareholders of SnapShot, an analytics dashboard.

Shiji recently disclosed its backing of Kalibri Labs, a data-based hotel revenue consultancy. It has been rumored to have invested in Leonardo, a company that helps hotels manage their visual assets, such as photos of rooms.

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In China, Shiji is responsible for at least 60 percent of the market share for enterprise software services among upscale and international hotels and luxury retailers. About 13,000 Chinese hotels use Shiji-networked systems, including many global brands.

Outside China, about 47,000 properties use products or services from Shiji Group. More than 100,000 hotels worldwide connect to Shiji’s inventory distribution system.


The company now looks overseas for growth, with the blessing of e-commerce giant Alibaba, which has a 13.07 percent stake.

By the end of this year, Shiji expects to have more than 500 employees outside of China — a headcount that has grown from a negligible number during the past four years.

Analysts following the public company estimate that Shiji will generate about $481 million in revenue for the year through December 30, 2018. That puts it second in hospitality tech sales leadership to Oracle Hospitality, which analysts estimate generated about $1.8 billion in revenue in 2017.

By dollar volume, they are the world’s largest hospitality tech companies.

Read the full article on Skift

Kalibri Offers Guide for Finding Optimal Business Mix

The success of any hotel depends on dozens of factors — some within your control and some outside it. But one thing is certain, hoteliers can maximize profitability by determining their Optimal Business Mix.

This is easier said than done. Business mix is a complex and intricate science with lots of variables. But a recent three-part report by Kalibri Labs seeks to decode those complexities by offering analyses alongside practical advice.

It’s kind of a how-to guide for finding a healthy balance of business at the lowest cost possible.

“The differences in cost by channel can range from 5% to 35% of guest paid revenue,” says Cindy Estis Green, CEO and Co-Founder of Kalibri Labs. “That variation needs management attention to ensure the mix of business, down to mix of accounts pursued, is the optimal one.

“We wanted to introduce analytics that would inspire hoteliers to think about their business in a way they might not have thought about it in the analog market, with a traditional view of performance,” she adds. “These analyses might trigger different actions.”

Part III of “Demystifying the Digital Marketplace” highlights all the different channels through which hotels receive business and the differing net revenue values that each channel generates.

It offers several different analyses hoteliers can apply to their own situations, including Flow-Through Analysis, Lifetime Value Analysis and Ancillary Spend Analysis.

“There are a few new ways to view the business due to the dominance of digital channels in the marketplace that are becoming mission critical,” says Green. “Threaded throughout is a sharper focus on profit contribution.”

Flow-Through Analysis dissects the amount of contribution to profit down to a gross operating profit level on a per-roomnight basis for the different channels used by guests. For example, the per-roomnight GOP from direct channels, voice and brand.com is significantly higher than that from third parties, she said.

Lifetime Value Analysis examines the value of recurring guests. Typically, loyalty members booking direct contribute a higher profit contribution than the cost of finding new non-recurring guests who book through third parties.

“Given the high costs of customer acquisition, retention efforts are more critical as recurring customers tend to spend more and are less costly to acquire,” says Green. “Growing a recurring customer base is going to be a driving force for success in the future.”

Ancillary Spend Analysis looks at the additional dollars spent on property beyond room revenue and shows how different types of guests tend to spend different amounts in food and beverage or other revenue centers.

“As we have seen with airlines, hotels have to consider all revenue opportunities, even in select-service settings,” says Green, adding that the report found loyalty guests who book direct spend more than guests coming from third party sources.

“A hotel is in the business of building a base of customers, not cycling through new customers,” says Green. “Decisions made every day have to take this into account.”

As the costs of customer acquisition continue to rise, it’s important to understand the different levels of profit contribution driven by different guests coming through the various booking channels.

“The most important theme of Demystifying the Digital Marketplace is that hotels need to determine their optimal business mix and use that to manage spending on booking plus sales and marketing funds, along with the time spent by their teams to focus on the highest and best use of their time,” Green said.


Read the full article on duettocloud.com


Disruption, loyalty play major roles in distribution

By Jeff Higley

WASHINGTON—The ever-changing hotel distribution landscape continues to regularly alter the way revenue specialists think—and that’s not going to change any time soon, according to panelists on the “Reordering the hospitality universe” session at last week’s Revenue Strategy Summit.

Marriott International’s Alexander Pyhan (left) enjoys the distribution conversation during the Revenue Strategy Summit. Also pictured is Ash Kapur of Starwood Capital Group. (Photo: Jeff Higley)

Marriott International’s Alexander Pyhan (left) enjoys the distribution conversation during the Revenue Strategy Summit. Also pictured is Ash Kapur of Starwood Capital Group. (Photo: Jeff Higley)

“The core issues of distribution, acquisition costs, where we put things on the shelf … all that stuff stays the same,” said moderator Andrew Rubinacci, president of AMR Hospitality Consulting and former SVP of distribution and revenue-management strategy for InterContinental Hotels Group. “It’s the players that change.”

Ash Kapur, SVP and chief revenue officer of hospitality for Starwood Capital Group, welcomes the so-called “disruptors” that continue to emerge in the hotel space. It’s a positive because they create more distribution options for hotels, he said.

“I can now pick and choose who I want to work with from an online distribution standpoint,” Kapur said.

The emerging platforms often show hotel companies consumer patterns that eventually force them to make big decisions, he said.

“We are living in a generation that we love marketplaces,” Kapur said. “Hotels have to decide very quickly: Either they become a collection of brands that mean something or they become massive marketplaces.”

Rubinacci said the situation that’s developed in the hotel industry can be described as stay brands vs. booking brands—and booking brands such as Expedia and Booking.com have in many cases gained the upper hand against traditional brick-and-mortar brands.

“You’ve got to start competing on the booking brand … there’s so much value to be gained from it,” Rubinacci said.

Brian Berry (left) of Cvent, said true disruptors in the lodging space introduced new business mod

Brian Berry (left) of Cvent, said true disruptors in the lodging space introduced new business mod

“At the end of the day, a disruptor is really an innovator,” said Alexander Pyhan, VP of distribution-OTA, meta and wholesale for Marriott International. “When you use the example of Uber, they have addressed a consumer need before the consumer even knew they had it. That’s why Uber is very successful.”

Brian Berry (left) of Cvent, said true disruptors in the lodging space introduced new business models that require technology to exist. Also pictured is Alexander Pyhan of Marriott International. (Photo: Jeff Higley)

Brian Berry, SVP of sales and data analytics for Cvent who spent 26 years working for hotel companies, agreed.

“The true disruptors in the space—the Ubers and Airbnbs—are truly disruptive because they introduced new business models that require the technology to exist,” Berry said.

Disruption in the industry will take many forms, the speakers said. There will be more consolidation in the hotel industry with big companies joining forces to compete with a marketplace mentality, according to Kapur.

“The winners in this space will be ones who can be attached to a marketplace and also give the consumer something more than a loyalty program ... a reason to stay with them,” he said.

Read the full article on HNN

RSS 2018: Revenue Strategy Begins With Strong Leadership

Industry Leaders and Disruptors Gather to Learn Latest in Innovation and Technology

"New Players, New Models" panel session during RSS 2018.

"New Players, New Models" panel session during RSS 2018.

Washington – The sixth annual Revenue Strategy Summit brought together technology innovators and hospitality industry leaders, including brand executives and asset managers, to examine the challenges hotels face in maintaining rate growth and managing a distribution landscape that gets more complicated by the day.

The one-day conference, held at the Knight Conference Center at the Newseum in Washington, D.C., combined hotelier-led panel discussions with keynote presentations on voice-activated digital assistants like Amazon's Alexa, blockchain's potential to improve hotel loyalty, and Wall Street investors' sentiment toward the travel industry.

In both networking opportunities and educational sessions, startup disruptors like KoddiKoridor and Skylark shared the stage with leaders from hotel companies like Marriott International, Starwood Capital Group and Red Roof Inn.

"It's gratifying to see RSS continue to grow in its sixth year," said Patrick Bosworth, Co-Founder and CEO of Duetto, which co-hosts RSS with Kalibri Labs LLC and Silver Hospitality Group. "The hoteliers who joined us for RSS recognized that they're competing with online travel agencies and newer digital disruptors to create more value for travelers. The companies that can achieve this earlier in an evolving customer journey will see continued success."

Cindy Estis Green, Co-Founder and CEO of Kalibri Labs, added: "Revenue Strategy is not just the way of the future for hotels — it's needed in the present, as the digital marketplace that has come to dominate hotel bookings only gets more complex. There are few events like RSS focused on the needs of revenue strategists, who must keep abreast of emerging technologies while remaining proficient in the blocking and tackling needed to target and deliver profit contribution and improve asset values."

A prevailing theme several hoteliers brought up during their presentations was the need for what one panelist called "revenue leadership," added Stacy Silver, President of Silver Hospitality Group.

"The important point our colleagues heard over and over this year is an effective revenue strategy has to start with investments in our people," Silver said. "To that end, we will always strive to make RSS the conference where current and future leaders can learn from each other and guide our industry through whatever challenges or opportunities come next."

Read the full article on Hospitality Net

2018 Revenue Strategy Summit Offers a Day of Deep Dives Into Hospitality Finance


On July 10, approximately 300 revenue managers, owners, operators, and other hotel professionals met at the Newseum in Washington, D.C. for the sixth annual Revenue Strategy Summit. Co-hosted by Duetto, Kalibri Labs, and Silver Hospitality Group, the one-day conference offered attendees a deep dive into revenue management and strategies, pulling in experts from all areas of the industry to discuss everything from new technologies disrupting the hospitality revenue space to the overall financial health of the lodging industry.

Patrick Bosworth, CEO and co-founder of Duetto, said that the conference was created to put a spotlight on revenue strategy and educate the hospitality market as to why it’s so important. He explained that demand is a complicated animal, with many factors influencing its ebbs and flows. “You’re not just receiving this demand. You’re not managing demand that’s coming to you and then designing marketing programs in a vacuum and then having your sales people out there trying to bring in group business or leisure-contracted business or corporate-contracted business. There needs to be an underlying strategy that underpins all of these different functions to be able to drive the most profitable business for hotels,” he described.

The event’s seven panels were augmented with plenty of opportunities for attendees to network with the speakers and one another, allowing them to make new connections that could improve their business and clarify details that may have piqued their interest, such as…

A Wider Distribution Landscape

One of the hot topics at this year’s Summit was the new distribution landscape, which includes many more avenues for potential guests to book than ever before. “The occupancy levels that we currently run as an industry are unprecedented,” noted Brian Berry, senior vice president of sales and data analytics for Cvent, a company that provides software for event management, web surveys, and email marketing, during a panel called “Reordering the Hospitality Universe.” “Never in any cycle have we ever achieved the kind of occupancy levels we’re achieving today. Some of it is the revenue management systems and the revenue management capabilities—we have to better manage our group patterns and our blocks—but a lot of it is the distribution landscape. We can simply provide our inventory to a broader set of customers then we’ve ever been able to reach, and that allows hotels to run 80 percent plus on an annual basis. It’s incredible, and it would have been unheard of 10 years ago,” he added.

“Data Is the New Oil”

Data was another common thread at the Revenue Strategy Summit. Many speakers came back to the phrase, “Data is the new oil.” It’s the most valuable resource that hoteliers have at their disposal to create the type of guest experience that drives occupancy and profits, and it’s the key to unlocking a property’s revenue potential. However, hoteliers need to invest in technology to glean useful information from data and make it actionable.

Jos Schaap, CEO of and co-founder of StayNTouch, a company that creates mobile hotel PMS systems, said, “Data speeds up personalization. In order to achieve good personalization, it’s important that there is a lot of data and that there is speed with which that data can be accessed. So you need to have fast computers, and more accessible devices. Computers need to compute lots of data to [help determine] what a guest wants.”

Slower Growth for OTAs

Several panelists also noted that OTAs may be approaching the end of a booming growth period, as they’ve reached a certain level of market penetration. “We’ve seen that the glory days have come and gone for the OTA space,” said Lloyd Walmsley, a research analyst for Deutsche Bank. Walmsley added that there’s still a shift from other channels to OTAs, but most of that can be attributed to the huge amounts of money that OTAs spend on marketing. From his vantage point, though, investors are starting to back off from OTAs because they’ve reached a point of maturation. “It’s a tough space to get data on, in terms of the overall penetration, but when you really strip out group and corporate, the leisure penetration, at least in the United States and Western Europe, is hitting 60 plus percent,” he added.

Incorporating Revenue Management Into A Hotel’s Processes

As the revenue management discipline becomes more prevalent in the hotel industry, another area that concerned many of the panelists was how to best incorporate it into a hotel’s existing procedures and processes. Bonnie Amato, chief revenue officer of Fulcrum Hospitality, strongly recommended training revenue management teams to lead during a panel titled “Revenue Strategy In the Digital Age: It Really Works.” “Make sure you’re training leadership skills in your revenue [team]. In my exposure with the people I’ve worked with, I’ve had people who can think the right way, but they haven’t been able to communicate and lead through the group through the numbers,” she said, adding that giving people who understand revenue management the skills to communicate their knowledge has been extremely effective, in her experience. “I was underestimating their skillset. It was phenomenal to see.”

In the same panel, Andrew Jordan, chief marketing officer of Interstate Hotels & Resorts, noted that revenue management shouldn’t only be left to revenue managers. “Invest in the right people, but break down the silos. At the end of the day, I don’t think it’s a department. I think the GMs are the ones who have to get on board and take some ownership of [revenue strategy],” he said.

Disruption is the Future

As a relatively new discipline in hospitality that relies heavily on technology, revenue management is prime for disruption, a fact that was brought up over and over again throughout the Summit. New technologies, like voice technology, artificial intelligence, and machine learning as well as blockchain, were explored in depth in different panels, but the positive feelings surrounding disruption were perhaps best summarized by Alexander Pyhan, vice president of distribution, OTA, meta, and wholesale at Marriott International. “At the end of the day, a disruptor is really an innovator,” he said.

Read the full article on Lodging Magazine

Revenue Strategy Summit explores the opportunities behind disruption

Patrick Bosworth, co-founder and CEO of revenue management software developer Duetto, addresses the Revenue Strategy Summit in Washington, D.C.

Patrick Bosworth, co-founder and CEO of revenue management software developer Duetto, addresses the Revenue Strategy Summit in Washington, D.C.

Everyone wants to be a disruptor, and with technology giants Amazon, Google and Alibaba moving into the hotel business there is no better time to learn from the industry’s biggest risk takers. That’s why Patrick Bosworth, co-founder and CEO of revenue management software developer Duetto, said the Revenue Strategy Summit was founded in the first place.

The event, now in its sixth year, took place on July 10 in Washington, D.C., with the goal of educating hoteliers on revenue-management strategy and how to remain successful in a world dominated by rapid disruption. Even though hotel companies have been outmaneuvered in recent years by nimble digital entities such as online travel agencies and home-sharing websites, Bosworth said there is still much reason for positivity.

“It’s my belief that hoteliers have been so far behind in their ability to create value in many channels that they have focused on the channels they have been able to control, where they have not seen erosion,” Bosworth said. “As new big entrants come in, they will compete for the same customers that Expedia and Booking.com do. It’s no longer a duopoly, and hotels have been able to leverage data to compete for those customers, as well.”

During a panel discussion, Alexander Pyhan, VP of distribution, OTA, meta and wholesale at Marriott International, said that with so many options for bookings open to consumers there must be a conscious reason behind every purchase, as well as a reason behind a consumer’s choice in brand. This reason can be something as simple as price or as complicated as a long-term relationship with a brand, but in many cases Pyhan said the power of loyalty and loyalty programs remains underappreciated.

“We need to create an ecosystem where the consumer returns,” Pyhan said. “The consumer wants a high-quality product, but they also want a seamless guest experience. That’s how brands need to evolve, not only from a hotel perspective but from a transactional perspective.”

Of course, such a simple premise comes with hundreds of operational and logistical hurdles, one of which is data. Pyhan referred to data as the “new oil,” and hotel companies must work harder than efficient data collectors like Google and Amazon to understand their customers. While it may not be possible to control whether or not a guest ultimately chooses to share his or her data with your company, it may be more pertinent to get a handle on your hotel’s online presence and how guests encounter your business on the internet.

“It’s hard for any brand owner or hotelier to understand where their inventory is being displayed online,” Pyhan said. “It’s frightening to invest billions in brand development, and you don’t know where it’s being displayed!”

Read the full article on Hotel Management

HB ON THE SCENE: Finding the Right Revenue Leader


WASHINGTON—Having a good revenue strategy is critical in hospitality today, but equally important is having the right person who can lead that strategy. At the Revenue Strategy Summit, held here at The Knight Conference Center in the Newseum, hospitality leaders discussed the changing face of revenue leadership.

Panelists discussed revenue leaders.

Panelists discussed revenue leaders.

In a session titled “Revenue Strategy in the Digital Age: It Really Works,” moderator Kathleen Cullen, SVP, revenue & distribution, Two Roads Hospitality, noted that revenue strategy has been evolving. “The discipline is moving toward involving planning and resource allocation to their strategic needs. Hotel revenue management has been a very tactical and very reactive discipline in the past, and we work very closely with sales and marketing, and sales and marketing is also not focused on planning and resource allocation. They tend to focus very tactically on the transactional: What can we do to get more eyeballs?” she said. “That means there is not a lot of planning and resource allocation happening within the revenue generation functions at hotels.”

Additionally, she noted, revenue management, sales, marketing and digital are often treated as separate. “We look at them in silos and we allocate resources in silos versus looking at a holistic approach,” she said. “It’s difficult to remove the walls that exist. Much of it is in the mindset. So much of the landscape has changed over the years, but hoteliers have not changed our approach and how we think about things.”

Read the full article in Hotel Business

All About the Guest: How Technology is Transforming the Hotel Experience

Left to right: Cindy Estis Green of Kalibri Labs; Mark Carrier of B.F. Saul Company Hospitality Group; Barry Goldstein of Wyndham Hotels & Resorts; and Ash Kapur of Starwood Capital Group

Left to right: Cindy Estis Green of Kalibri Labs; Mark Carrier of B.F. Saul Company Hospitality Group; Barry Goldstein of Wyndham Hotels & Resorts; and Ash Kapur of Starwood Capital Group

HOUSTON—Technology is at a crossroads in the hospitality industry. While brands are trying to connect the dots and patch up areas of disconnect, they’re also trying to bring in new, advanced guest experiences. The challenge comes from integrating these innovations into legacy properties, which may have more outdated technology in place, making the shift costly. But one aspect that holds true across all properties is a strategy of consistency in experience, which was discussed at this year’s HITEC Houston.

During the “Technology and the power of the C-Suite” general session, a panel of top-level executives gave possible solutions to this challenge, as well as hopeful insights. While there was some opposition about how exactly to overcome technology’s transformations, all agreed that it could either make or break the guest experience, depending on its functionality—whether or not this technology works properly.

Ash Kapur, SVP of hotel asset management and CRO for Starwood Capital Group, stressed the importance of having a brand vision and a set strategy for long-term goals. “I see a lot of Band-Aids; I see a lot of things broken. What bothers me is that there is not a single approach today in technology,” he said. “The hospitality space is extremely myopic.”

Mark Carrier, president of B.F. Saul Company Hospitality Group, agreed, but recognized that while a disjointed strategy may obstruct a cohesive guest experience among properties, it presents new possibilities. “Rather than an integrated technology approach for brand companies, it ends up patched together. Not being fully integrated creates opportunity for innovative, faster moving companies,” he said.

Others weighed in, noting how guest experience plays into this strategy. Cindy Estis Green, CEO of Kalibri Labs, mentioned that it wasn’t always about guest-facing products. With technology being tactical in the early days, very little emphasis was put on the guest journey, but now, it’s taking center stage. “Now it’s part of the brand definition. You can build technology around exactly what you want the brand to deliver,” she said. “To do technology because it’s cool doesn’t make it. To do technology that actually becomes seamless in the guest experience is the magical part.”

A consistent brand strategy has to encompass functioning technology for a frictionless guest experience. According to Barry Goldstein, EVP and chief commercial officer for Wyndham Hotels & Resorts, hotels have very few chances to get this right. Goldstein said that once a hotel presents guests with a product that simply doesn’t work, the guest no longer wants to interact.

Read the full article in Hotel Business

How Hotel Managers Can Generate Profits Above and Beyond Owner’s Expectations

By Max Starkov

The hospitality industry is enjoying its longest expansion and healthiest growth in decades, yet, are the owners happy?

The hospitality industry is enjoying its longest expansion and healthiest growth in decades, yet, are the owners happy?


The economic collapse of nearly ten years ago brought not only havoc to the hospitality industry, but also created a new type of hotel owner: the activist owner. These owners are knowledgeable, curious, involved, and demanding.

There is a lot happening in 2018 that hotel owners should be happy about. After the best Q1 on record earlier this year, it is shaping up to be another stellar year in hospitality with demand (2.4%) outweighing supply (2%); occupancy increasing by 0.4%; ADRs growing by 2.6%; and RevPAR increasing by 3% (STR, PWC).

The hospitality industry is enjoying its longest expansion and healthiest growth in decades, yet, are the owners happy?

For one, in spite of record-breaking industry benchmarks, profitability is falling and net room revenue—i.e., revenue that remains with the hotel after accounting for distribution costs (OTA commissions, traditional agency commissions, and other distribution expenses)—has been declining steadily over the past several years. In 2017 U.S. hotels earned roughly $155.2 billion in guest-paid revenue but paid an estimated $25.2 billion to acquire guests in the form of OTA commissions and other distribution costs, retaining significantly lower net room revenue of $130 billion (Kalibri Labs). Revenue capture—i.e., net room revenue that remained with the hotels—declined from 84.9% in 2015 to an estimated 83.5% in 2018 (Kalibri Labs).

As far as falling profitability is concerned, 2018 is shaping up to be a repetition of 2017. The overall growth in room revenue, occupancy, and RevPAR that many hoteliers have been enjoying in recent years cannot possibly compensate for “the loss of wealth” in the form of steadily increasing distribution costs via the OTA.

So what should hotel management companies (HMC) do to increase profitability for owners and fulfill their fiduciary obligations as responsible managers? Naturally, any good and responsible HMC can do a lot to improve the bottom line for their hotel owners. However, here we will focus only on increased profitability as a result of smarter distribution and digital marketing strategy.

Read the full article on Hotel News Resource

HITEC Panel: Technology investment requires direction, clear goals

HOUSTON — It doesn't pay to invest in technology without a plan. However, a panel of hotel executives at the Hospitality Industry Technology Exhibition & Conference 2018 in Houston accused the industry of failing to look before it leaps into technology upgrades, charging ahead without a precise objective.

From left: Michael Levie, COO at citizenM Hotels; Cindy Estis-Green, CEO and co-founder of Kalibri Labs; Mark Carrier, president of B.F. Saul Company Hospitality Group; Barry Goldstein, chief commercial officer at Wyndham Hotels & Resorts; and Ash Kapur, SVP of hotel asset management and chief revenue officer at Starwood Capital Group.

From left: Michael Levie, COO at citizenM Hotels; Cindy Estis-Green, CEO and co-founder of Kalibri Labs; Mark Carrier, president of B.F. Saul Company Hospitality Group; Barry Goldstein, chief commercial officer at Wyndham Hotels & Resorts; and Ash Kapur, SVP of hotel asset management and chief revenue officer at Starwood Capital Group.

Ash Kapur, SVP of hotel asset management and chief revenue officer at Starwood Capital Group, said he is concerned by the number of legacy systems propping up the industry. He also is weary of the number of systems in a hotel’s “tech stack” (a combination of software products and programming languages used to create a web or mobile application) that have been temporarily repaired with “Band-Aids,” as he said. Furthermore, Kapur said that as the industry works to fix its growing list of tech limitations, organizations within hospitality continue to attempt to disrupt or reset aspects of the customer journey, creating more problems.

“The hotel space right now is very myopic. I think in some cases we have to press reset and ask what is a brand’s vision, what is the customer journey, and is there technology out there to help connect the dots,” Kapur said. “It’s important to have a vision, a sense of where you want to be three to five years down the line, and I don’t see that happen all the time.”

Cindy Estis-Green, CEO and co-founder of Kalibri Labs, said the hotel industry once was tactical in its approach to technology spend and integration. Today, however, she sees and industry that is hungry to innovate while simultaneously lacking direction.

“Technology was very tactical in the early days,” Estis-Green said. “If you couldn’t justify saving labor, then you couldn’t put new technology in. Accounting, point-of-sale and front-desk check-in took priority. Now we want the tech stack to deliver guest services, and we want technology to be front-and-center, which is a challenge because we have a lot of legacy systems.”

Read the full article on Hotel Management

HITEC: Industry must think holistically about tech

Cindy Estis Green of Kalibri Labs; Mark Carrier of B.F. Saul Company Hospitality Group; Barry Goldstein of Wyndham Hotels & Resorts; and Ash Kapur of Starwood Capital Group; speak during the Hospitality Industry Technology Exposition & Conference

Cindy Estis Green of Kalibri Labs; Mark Carrier of B.F. Saul Company Hospitality Group; Barry Goldstein of Wyndham Hotels & Resorts; and Ash Kapur of Starwood Capital Group; speak during the Hospitality Industry Technology Exposition & Conference

HOUSTON—Technology is vitally important to the overall success of the hotel industry, but the industry’s general approach to utilizing technology might be holding it back, according to a panel of experts speaking during the Hospitality Industry Technology Exposition & Conference.

During the “Technology and the power of the C-suite” general session, Ash Kapur, SVP of hotel asset management and CRO for Starwood Capital Group, said he’s witnessed a lot of what the industry does wrong with tech over his years of combing through acquisition opportunities.

“When you look at the tech stack, in most instances you see a lot of band-aids,” he said. “There are a lot of things broken, and it’s not just the companies we’re pursuing. You see it across the landscape of hotels.”

He said the industry’s piecemeal approach to technology can often lead to bad guest experiences. He used the example of a front-desk employee having to ask a guest for a cellphone number at check-in to enable an on-property texting system, when the hotel already had the guest’s phone number in either its property management system or customer relationship management software.

“That’s the break,” he said. “Those are issues that need to be addressed.”

Data and privacy
Each of the panelists highlighted the need for systems that intuitively speak to each other and share important data for both guest-facing and behind-the-scenes improvements.

“Capturing that (data) flow and making it seamless is the challenge,” Kalibri Labs CEO Cindy Estis Green said. Achieving that goal will ultimately lead to a better level of recognition for repeat guests and better guest experiences, she added.

But Barry Goldstein, EVP and chief commercial officer for Wyndham Hotels & Resorts, said the need for seamless data sharing across a property’s systems and across brands comes with the very practical challenge of ensuring guest information remains safe and secure.

“The lens that makes this harder is privacy,” he said.

Panelists agreed that ultimately guests will agree to share data with hotel companies if there is an obvious payoff in terms of an improved experience.

“That’s driven by if you give me a good enough reason (to share information),” Kalibri Labs’ Green said.

She noted the hotel industry has had to shift how it views the ultimate purpose of technology. In the past, technology was largely viewed as a money-saving tool, and any new implementation would have to be tied to labor savings to drive return on investment, she said. But today, guest experience should be the driving factor in considering technology investments, she said.

“Now we’re using technology to be front and center as part of the guest experience and brand definition,” she said.

Read the full article on HNN

The OTA battlefield: Legislation to loyalty

By Gary Isenberg

The struggle to persuade guests to book direct instead of through an online travel agency is ongoing, but hoteliers have a number of factors working in their favor.

Hotel brands fight valiantly against the online travel agencies in an attempt to sway consumers to book direct through their proprietary channels.

It’s going to take an industrywide, two-pronged attack, however. On one front, the industry must lobby for legislation to prevent third-party booking sites from misrepresenting themselves as the brand channel.

Fortunately, that’s already happening. The American Hotel & Lodging Association’s ongoing strategic offense targets beltway influencers. Recently, the AHLA successfully campaigned the Federal Trade Commission, which found and charged a third-party reservation center for deceiving consumers into believing they’re booking directly with a hotel. The ruling of the FTC bans the misrepresentation of a hotel’s identity, now requiring clear disclosure of third-party OTA status and a compliance report.

Consumers are speaking up. According to Research & Polling, 88% of consumers desire transparency in hotel booking. Media Day NY & DC has found that 72% of consumers want the government to enforce laws on these third-party affiliates. The AHLA has partnered with several consumer protection advocate groups, such as the Better Business Bureau, to educate consumers on how to avoid misleading and fraudulent sites. The AHLA is applauded for its efforts and results. It is off to a good start.

Simultaneously, several of the major hotel companies have taken the OTAs head on, launching national advertising and media campaigns educating the consumer on the benefits of booking direct with a lowest-price guarantee. Hilton, Marriott, Hyatt and IHG kicked off book-direct efforts in 2016.

In addition to the lowest-price guarantee, the brands have turned to their elite loyalty programs and conceived a slew of exclusive guest perks for their reward members in an effort to sidestep the OTAs and increase their direct bookings. These programs appear to be making headwinds.

Loyalty programs do work
A recent J.D. Power survey suggests loyalty programs do create a bond between a guest and a brand. Nearly half (47%) of the more than 4,600 hotel rewards program members polled said they had booked a hotel room within the past 12 months through the brand.

Last year, a study by Kalibri Labs found between 40% and 60% of reservations in the upper-midscale, upscale and upper-upscale segments came through loyalty programs in 2016. What’s more, brands grew rewards memberships by between 30% and 40%.

These loyalty programs increase direct bookings because the brands now use the one powerful tool they have over the OTAs: delivering a superior guest experience. By delivering first-rate services exclusively to rewards members, brands have the opportunity to pry consumers away from the OTAs.

Although the efforts of the brands and industry as a whole have had some success, the brands still lag behind the OTAs in bookings, according to Hitwise. The online market trend tracker counted reservations made via the OTAs and the brands’ platforms between May 2016 and May 2017 and found the OTAs grabbed 58.3% of the bookings compared to 41.7% reserved through brand channels.

Read the full article on HNN

The OTA’s Attempt at Discrediting the Value of the Hotel’s Direct Channel

By Max Starkov, President & CEO at HEBS Digital


Earlier this week, the European Technology and Travel Services Association (ETTSA) released a report called "Hotel Distribution Costs," examining the costs associated with direct and indirect distribution channels for hotels, together with the impact of channel shift.

ETTSA is an organization "representing and promoting the interests of global distribution systems (GDSs) and travel distributors (read: OTAs), towards the industry, policy-makers, opinion formers, consumer groups and all other relevant European stakeholders."

The report, prepared by a consultancy called Infrata, concluded that hotels that attempt to boost direct bookings at the expense of agencies and OTAs risk having lower occupancy rates with "no measurable" savings on costs, and suggested the main reason for hoteliers to push direct sales is to "reduce transparency for consumers."

The ETTSA report uses "a magic wand" to convince the naïve or whoever is listening that hoteliers would be much better if they abandon their useless direct distribution efforts and rely on the OTAs for their distribution. The report's highly selective "analysis":

  • Dramatically overstates the effect of the much discredited "OTA Billboard Effect"— remember the unfortunate Cornell University "study," financed by the OTAs? This study, disproved many times over, tried to convince hoteliers that they should use OTAs in order to generate more bookings from the property's own website, due to the so-called "Billboard Effect."
  • Underestimates the complexity of the online travel consumer journey: Today's travel consumer engages in 38,983 digital micro-moments in just under two months, and the average travel consumer journey takes about 17 days, eight research sessions, 18 site visits, and six clicks before making a hotel booking (Google Research).
  • Tends to over-estimate the hotel's direct distribution costs and undervalue OTA distribution costs, which go beyond the OTA commissions, and include costs associated with revenue management, APIs, GDS, CRS and channel management systems, etc. OTA channel management alone occupies an increasing share of the revenue manager's bandwidth, which means rising payroll and benefit expenses.
  • Does not account for the fact that direct booking costs are fixed, while OTA distribution costs are percentage of room revenue and grow with higher ADRs or longer length of stay (LOS).
  • Makes the rather offensive claim that hoteliers' direct booking campaigns are motivated by the hotelier's desire to "decrease customer transparency."

Read the full article on Hospitality Net

Marriott and Hilton’s Group Commission Cuts Put Pressure on Industry

As hotel chains have shifted their business models over the last decade, keeping owners happy has become the priority. Slashing group booking commissions for intermediaries saves owners money, so it’s easy to see how the largest U.S. chains will follow the example of Marriott and Hilton in the near future.
— Andrew Sheivachman

Travel agents and meeting planners are becoming the latest group to feel the pressure from hotel industry consolidation.

A decision by Marriott International, with Starwood Hotels in its fold now, to cut group hotel commissions was soon followed by Hilton Worldwide. Marriott has already reduced commissions on North American group hotel bookings to 7 percent, from 10 percent, demonstrating that hotel chains won’t be afraid to put pressure on travel agents and meeting planners in the future (Hilton’s cut will go into effect later this year). It will also likely mean increased costs for corporations and groups that hold events at hotels as agents and planners pass on costs to them as they grapple with the commission cuts from hotels.

“We want to make sure we have [a policy] that is fair and equitable, and we felt this is the right [move],” Brian King, Marriott International’s global officer of digital, distribution, revenue management, and global sales, told Skift. “There was some rumor going around that commissions would be cut to zero, [but that was never an option]… any time a business model shifts, [agents and planners] need to recalibrate their business, but by the same token we’re also encouraging planners to move to a different, [more transparent] planning model.”



Although not everyone agrees that it comes down to ownership issues. Hotels used to have meeting planners on staff to deal with the booking and planning of events; this process has become outsourced to a variety of third-party planners, venue sourcing organizations, and now a variety of online booking sites for small group events.

“The value chain swung from one side to the other, and a focus on cost became much more of a spotlight issue,” said Cindy Estis Green, CEO of Kalibri Labs, a hotel benchmarking firm. “Hotels have been paying more for the same business, there’s been a spike in costs for relatively flat group business.  They’re getting the same business and having to pay double or triple for it.”

In Estis Green’s estimation, tension has been building up in the ecosystem for more than five years.

Kalibri Labs recently released a report crunching the numbers on the costs hotel pay for group business. Its analysis found that larger hotels, which generate the most group business revenue, pay the largest cost as a percentage of group revenue for groups and meetings business.

skift g&m.PNG

“Big hotels write the biggest checks,” said Estis Green.

The commission cuts are related to the cost of customer acquisition for a hotel’s group business; an abundance of factors, from planners and agents to city housing fees and overall technology costs, drive up the cost of a booking for hotels, and this has led the brands to cut costs.

Kalibri Labs suggests that the costs paid out to companies involved in group bookings could double for U.S. hotels by 2022.

Read the full article on Skift

At AAHOA, hoteliers learn how expensive it is to acquire customers

NATIONAL HARBOR, Md. — It’s no longer enough for hoteliers to set targets for revenue in 2018. Now they should be setting targets for the cost of making sales. That’s the message Cindy Estis Green, CEO and co-founder of hotel revenue performance analyst Kalibri Labs, delivered tthis week at the Asian American Hotel Owners Association's 2018 annual conference, here at the Gaylord National Resort & Convention Center.

According to Green, hotels earned roughly $155.2 billion in guest-paid revenue in 2017. But in order to make that money, hotels spent an estimated $25.2 billion to acquire guests, retaining a significantly lower $130 billion (a metric Kalibri Labs refers to as “revenue capture”). Vast swaths of these expenses are impossible to avoid, but many are the product of online travel agency fees and other concerns, which, with a little bit of strategizing, can be mitigated.

One way hotels are managing this is by promoting direct bookings. In 2017, Green said hotels pulled in 22.6 of their overall bookings from brand.com, while OTAs brought in only 13 percent. At first blush, this seems like a remarkably positive trend, but hotels’ revenue capture actually decreased from 2015 to 2016. In 2015, hotels’ revenue capture was recorded at 84.3 percent, but it fell to 83.8 percent the following year. These metrics, however, were recorded before the hotel industry began a concerted push to increase direct bookings.

“The book-direct campaigns are big, and have been very effective at increasing brand business,” Green said. “Brand business will always be better for your bottom lines, and the health of the industry.”

Revenue capture is the revenue hotels retain after spending to acquire guests.

Green anticipates revenue capture will decline again in 2018, although there may be hope. Kalibri Labs reported performance in brand.com sites is forecast to improve 5.4 percent in 2018, while voice-based bookings will grow 3.8 percent. However, property-direct bookings are forecast to be down 7.5 percent, while OTAs are expected to increase 8.1 percent and global distribution systems will be up a meager 0.6 percent.

Read the full article on Hotel Management

Hilton Joins Marriott in Slashing Planner Commissions

Second major hotel chain will cut third-party planners' rate to 7 percent from 10


Hilton Hotels & Resorts today announced that it is following Marriott's lead and cutting the commission it pays to third-party meeting planners who book business at its U.S. and Canadian hotels from 10 percent to 7 percent, effective Oct. 1. Existing business booked before then will not be affected. 

In announcing the commission cut, Hilton senior vice president and commercial director, Americas, Danny Hughes (pictured), said that while his company recognizes, "the important and integral role" third-party planners play in its meetings and events business, "in light of growing group distribution costs and the complexity of intermediary [third-party] services offered, Hilton has revised its base group sales commission rate."

Still, Hilton has provided six months lead time until the new commissions plan comes into place, giving planners and their clients time to adjust to the new structure. Since the Marriott announcement, there has been some discussion in the industry that the commission model might not be the best way for third party planners to price their services.

Hughes adds, "We are respectful of how the changes that are being made impact our partners, and we took that under careful consideration as we planned for this update. What we're really focused on right now is a better way to balance the needs of all parties involved, enabling our owners to invest more in meaningful innovations that will drive more happy guests and more meetings to our hotels."

Hilton's plan is also not mandatory for all properties, Hughes confirmed, noting that the company "is changing its base group sales commission rate, which will be applicable to commissions paid by Hilton and at participating hotels in the U.S and Canada. As with many other Hilton programs, we anticipate a high degree of participation in this program."

"It's a sad day in the industry, round 2," said David Bruce, managing partner of CMP Meeting Services, who reacted to Marriott's move by quickly forming an organization that is in the process of turning into an industry association for small third-party companies and individuals, Meeting Planners Unite. 

"It's a shame Hilton is following suit with Marriott and not looking out for relationships Hilton has had with the third-party market for quite some time," he added. "You do business with the people you trust. Here is another example of a chain forgetting who buttered their bread for so many years."

Hughes says Hilton's move is necessary in order to "balance the needs of all parties," adding that the reason for the cut is easing the costs that hotel owners pay for group business. That, "will allow our owners, over time, to make further investment in products and offerings that enhance the guest experience."

He points to a new report by research firm Kalibri Labs that found the cost of group business acquisition has risen dramatically in the past five years, to more than $4 billion, and is expected to reach $8 billion to $10 billion in the next five years. "The total costs can reach upwards of 35 percent of room revenue per group when all costs are considered," Kalibri said in its report. 

Read the full article on Successful Meetings

Hilton Follows Marriott's Lead on Commission Cuts

Danny Hughes, Hilton's senior vice president and commercial director for the Americas

Danny Hughes, Hilton's senior vice president and commercial director for the Americas

Two months following Marriott International's announcement that it would reduce group-intermediary commission rates to 7 percentHilton has announced it will do the same. Hilton is providing third parties with more notice than its competitor, however. Group business booked by intermediaries at participating hotels in the U.S. or Canada on or after Oct. 1, 2018, will be subject to Hilton's new base commission rate of 7 percent. Business booked before then will be honored at the commission rate previously contracted.

That Hilton refers in its statement to "participating hotels" indicates the change isn't mandatory for all properties. "We're changing our guidelines on the commission rate," explained Danny Hughes, Hilton's senior vice president and commercial director for the Americas. "But I can tell you that, like so many programs we have, we anticipate a huge amount of participation in this. It's a discussion point we've been having with owners for a long, long time now. I'm confident it will be very high participation."

The decision is a result of growing group-distribution costs and the complexity of intermediary services offered, according to Hughes. "This is truly something that is good for everybody," Hughes continued. "Whilst the move might be initially met with some frustration, the one thing we all share - whether it be the hotel, whether it be us as the brand, whether it be the third-party meeting planners - the one thing we are all totally aligned on is that we thrive when great meetings happen in our hotels. And that's what this is going to help facilitate. It's going to allow owners to actually make investments in both the physical product and in new innovations that are coming along, and of course, great, great service - and hopefully that's going to mean more and more meetings, which is good for everybody. That's really the crux of why we're doing this."

When asked about exemptions or delayed timelines for certain large third-party intermediaries, a Hilton spokesperson reiterated that the updated group-commission rate structure applies to all new group business in the U.S. and Canada booked on or after Oct. 1. "Like any company, Hilton has strategic partnerships and agreements with certain organizations, the details of which are confidential," the spokesperson added.

According to Hughes, Hilton felt this was the right time to address the problem of rising distribution costs and attempt to strike a balance. "It's a complicated ecosystem," he noted, and referred to a recent study from Kalibri Labs, titled "U.S. Groups & Meetings: The Economics and Complexity of Intermediation." "There are some interesting findings - there are more acquisition costs that have been creeping in. It's not just the third-party commissions now, there are channel costs, there are housing-bureau fees, there are reservation fees, there are loyalty-planner points and attendee-loyalty points. You've got all these extra acquisition costs, as well as the proportion of business that's going through third parties. It's been growing rapidly, and if the trajectory remains the same, it will soon be 60 percent of the business going into hotels that is intermediated. And all of these things have costs.

"Ultimately, it's a competitive world," Hughes continued. "We need to provide incredible facilities in our hotels to actually attract meeting planners. And that takes investment."

Hughes does not, however, want to discourage independent planners from booking Hilton. "We value the third parties," he said. "They provide a valuable service that's an integral part of the operation, and nothing about what we're doing is trying to decrease the amount of third parties or their business that comes through. We do think the costs need to be rebalanced a little bit. But we absolutely value them, and will continue to extend a hand of friendship and cooperation to the third parties."

Following Marriott's announcement, there has been a good deal of talk about whether the commission model itself is unsustainable and will remain. Hilton's future plans regarding commissions are unclear. "We certainly analyze all the time our distribution strategies and costs and are constantly reevaluating them," explained Hughes. "There's been a lot of thought put into this, and we felt that this is the time to redress the balance of the costs, and this is the appropriate and fair new commission level. How that will change over time, I don't know. We certainly have not planned right now to make any further cuts or changes."

Hughes wants independent planners to know that Hilton has every desire to continue working with them. While Marriott last month canceled a meeting with Meeting Planners Unite founder David Bruce, citing antitrust concerns, Hughes said he wouldn't eliminate out of hand any discussion possibilities if asked. "I can tell you that every request to meet we look at on its own individual merits and see if it's appropriate," he said, "and we'll certainly apply that same openness to any request to meet, from any party. (David Bruce also discussed the matter today with M&C.)

"We respect the place that third-party planners have in the industry," Hughes added. "And we'll continue to do so. We think it's an important range of services. I truly believe the more we can work together to have more great meeting facilities, the more we all truly benefit."

Read the full article on Meetings & Conventions

Diminishing returns: The growing impact of group commissions on profits (Part I)

As an industry, we have dedicated a considerable amount of time discussing and debating the impact of OTAs and in particular, market share and costly commission structures. This stands to reason, as transient business (including corporate and leisure guests) booking through these channels represent the lion’s share of room nights for hotels. However, the issue of intermediaries and costs related to group business is of equal concern, and in some cases represents even higher commissions that continue to increase at a significant pace.

In a recent blog post, Attack of the silent profit killers, I touched on this issue: “Across our big-box hotels (15), we have seen staggering increases in group commissions in 2017, with minimal growth in group rates and ancillary spend, creating a double hit to profitability. To provide a sense for the impact, group commissions for one of the convention hotels in our asset management portfolio increased nearly 27% year-over-year, representing a US$700,000 increase YTD through September. As a percentage of group room sales, this property experienced an increase of more than a point, representing 10% of total group revenue… alarming.”

Today, we have some new data on the subject that further validates my concerns. No other organization has dedicated more time and expertise to highlight the impact of intermediary expenses and develop specific tools to help navigate this new landscape than Kalibri Labs, which recently published a special report entitled U.S. Groups & Meetings: The Economics and Complexity of Intermediation, which speaks to this very issue.  

Highlights from the study:

  • Current group and meetings business in the U.S. approximates US$300 billion;
  • Of which, US$140 billion is spent on rooms;
  • Of which, US$30 billion represents room rental revenue, and the balance spent on F&B, ground transport, audio visual and other ancillary requirements; and,
  • Bringing this down to the property level, groups and meeting represents on average 15% of room nights across all segments, but in the 30% to 35% range for full-service hotels (with ADRs of $220 or more).

The study goes on to share that small meetings, defined as requiring under 100 rooms on the peak night, make up almost three-fourths of the meetings in the U.S. (although only 28% of meetings revenue). Key take away here: smaller meetings, lots of sales effort and unique space requirements needed.

The increasing role of intermediaries in group business is further compounded by the “groups and meetings ecosystem … which entails a complex process from the point at which an event is contemplated through to its execution … many intermediaries involved at various points in the value chain which adds to the process’ fragmentation and ultimately its costs.”

Just how much are these intermediaries costing hotel owners?

  • In 2017, 43% of group business was intermediated (versus booked direct), and is projected to increase to 60% by 2022;
  • Cost of acquisition has risen dramatically over the past five years, paying from 15% to 35% for many pieces of group business, and could conceivably double by 2022;
  • Group booking intermediation is expected to evolve further to include a combination of third-party planners and third-party technology providers, so the rate of intermediation will grow; and,
  • A larger percentage of smaller-sized groups (remember those representing three-quarters of group rooms booked!) will be sold through intermediaries.

What do I think brands/operators should do about it?

  • Major brands should continue to leverage their size and scale to negotiate lower group intermediary commission rates and fees. Marriott International was the first to step up to this challenge, lowering commissions 3 points, effective March 31, 2018. Owners hope that other brands will follow suit.
  • As the Kalibri study suggests, now is the time for the hotel industry to introduce “digital processes that improve work flow and customer experience and consider ways to avoid commoditizing the meeting experience.” Specifically, seek opportunities to increase ease of booking and establishing pathways and methodologies to reduce costs. This sounds like a call for investment in technology to me and it’s the brands that need to step up to make this happen, not only for owners but also to stay relevant themselves.

Read the full article on HOTELS Magazine

Study: Increased Intermediation in the Groups & Meetings Segment

ROCKVILLE, MD—Kalibri Labs has released its latest hotel industry study, which encompasses the groups and meetings market segment. The report highlights that groups and meetings business in the U.S. represents approximately $300 billion, with about $140 billion spent in hotels. Of this $140 billion in hotel spend, about $30 billion represents room revenue, with F&B, ground transportation, AV and other ancillary requirements making up the balance.

The report shows that groups and meetings business is about 15% of total U.S. room nights across the full spectrum of hotel segments. Full-service hotels at the higher end of the rate range (those over $220 published rates) have 30-35% of their room nights generated by groups and meetings business. Small meetings, defined as requiring under 100 rooms on the peak night, make up almost three-fourths of the meetings in the U.S.; however, this represents just over one-fourth of the meetings revenue (28%). The balance of revenue is split between meetings requiring between 100-499 rooms (33%) and those over 500 rooms (39%).

The complexity of the groups and meetings ecosystem is put on display in the report and details the process from the point at which the concept of the event is conceived through to its execution. There are many intermediaries involved at various points in the value chain, which adds to the process’ fragmentation and, ultimately, to its costs. Cost of customer acquisition has risen dramatically over the last five years as the proportion of intermediated events has increased, equating to over $4 billion in 2017 and is expected to reach close to $8 billion to $10 billion by 2022, according to the company. The total costs can reach upwards of 35% of room revenue on many pieces of group business when all third-party commissions and other booking costs are considered.

The report also reveals that automation has entered many aspects of the groups and meetings sourcing, booking and execution process over the last five years and is accelerating, but it hasn’t always made the process more efficient for those involved.

Cindy Estis Green, CEO and co-founder of Kalibri Labs, said, “With this renewed attention, the next two to three years appear to be an inflection point in the way the groups and meetings process will evolve. Operators with hotels of all sizes should pay heed to the costs and processes in place as they are likely to affect all events from the smallest social events to the largest corporate and association meetings. An open and robust dialogue on how to improve the efficiency of this ecosystem would benefit all involved to improve the overall guest experience and reduce costs for all parties.”

Read the full article on Hotel Business